RBS runs up £469m loss after Williams & Glyn debacle

RBS slumped to a £469 million loss for the last quarter as it counted the cost of its failure to sell the Williams & Glyn division.

It said discussions were under way with “interested parties” about a sale of this business and confirmed it would miss the deadline imposed by the European Commission. It was in talks with the EC about what happens next with regard to meeting the conditions of its 2008 bail-out.

Over the last quarter the bank spent £301m reshaping its business for the carve out of 300 branches to be sold under the Williams & Glyn brand. This included £127m of termination costs associated with the decision to discontinue the programme to create a “cloned banking platform”.

RBS said work has continued “to explore means to achieve separation and divestment of the business previously described as Williams & Glyn.

“RBS has had positive discussions with a number of interested parties concerning a transaction related to substantially all of the business. These discussions are ongoing and may or may not lead to a viable transaction.

“However, none of the proposals under discussion can deliver full separation and divestment by 31 December 2017. RBS is therefore in discussion with HM Treasury, and expects further engagement with the European Commission, to agree a solution with regards to its State Aid obligations.”

Chief executive Ross McEwan said: “We’ve said that 2015 and 2016 would be noisy as we work through legacy issues and transform this bank for customers.

“These results reflect that noise. Our core business results were good with a £1.3bn adjusted operating profit, our best quarter since 2014. The core business has now delivered on average over £1bn in adjusted operating profit for the last seven quarters.”

On the claims that the bank deliberately worked against the interest of small firms, Mr McEwan said: “We have seen nothing to support the allegations that we distressed customers for our own gain.”

On the legal claim by small shareholders over the 2008 rights issue, he said: “We met with claimants in July. We did not reach a settlement. We are not giving further details. We are exploring options but if that fails we will be in court in March 2017.”

Speaking on behalf of the small firms, James Hayward, chief executive of RGL Management said: “RBS continues to mislead the market by not making adequate provisions to meet pending legal challenges.

“RBS is well aware of the businesses they destroyed through the actions of GRG and they are also aware that RGL will shortly be bringing a multi-billion pound claim to finally bring redress and compensation for the members of this action.”

The third quarter loss compared to a £940m profit for the same period last year which was inflated by a £1.15 billion gain on its sale of Citizens Bank.

Over nine months the bank has turned a £761m attributable profit into a £2.5 billion loss.

There was no mention of extra PPI costs.

The underlying business continues to improve with an operating profit of £255m for the quarter compared with an operating loss of £14m in Q3 2015.

Adjusted operating profit of £1.333bn was £507m, or 61%, higher than Q3 2015 reflecting increased income and reduced expenses.

As a result, RBS topped the blue-chip index in early trading with its shares up by more than 3.1%.

Litigation and conduct costs of £425m include an additional charge in respect of the recent settlement with the National Credit Union Administration Board to resolve two outstanding lawsuits in the United States relating to residential mortgage backed securities.

Chris Wheeler, an analyst at Atlantic Equities, said legacy issues from before RBS was bailed out “continue to dog” the bank.

AJ Bell investment director Russ Mould said: “Royal Bank of Scotland continues to be mired by ‘legacy issues’ which pushed it into the red in the three months to the end of September.

“Stripping out restructuring costs and provisions for litigation, RBS made an adjusted quarterly operating profit of £1.3bn, its best since 2014. The core business has now delivered, on average, adjusted operating profits of over £1bn for the last seven quarters.”